Two-Brand Strategy Spells Success

It
was called disruptive. It was called risky. It could even have been
called the result of a mid-life crisis. But five years after Dow Corning
reinvented itself with a two-brand strategy, the experiment may now be described
as a success.

By changing the way it approached business -
putting customer needs first by offering a choice in how to purchase materials
and solutions - Dow Corning has experienced double-digit sales growth every
year since 2002, with a record sales growth of 13% in 2006 over the same period
in 2005.

For its first 50 years, Dow Corning developed an industry
with product innovation and technology leadership based on silicon science.
Product technologies ranged from silicone fluids used in hair- and skin-care
products to advanced silicone sealants that have enabled skyscraper
construction and shaped global skylines to materials that protect circuit
boards and sensitive electronic assemblies against costly failure. But the
business landscape shifted dramatically in the 1990s. With a global recession,
currency crises, and increased competition from both global and local suppliers
around the world, product innovation alone could no longer drive or sustain the
company’s success.

The launch of its online business,
Xiameter, was a bold step. The new business model, designed for a certain
market segment - price-seekers - came with a risk of cannibalizing the
traditional Dow Corning® brand if current customers
moved to the new offering. While Xiameter provides market-driven prices and
products that do not come with added services, the Dow Corning brand enables
customers to purchase products along with full service and solutions
offerings.

“Severe cost pressures made customers more wary
and demanding,” said J. Donald Sheets, chief financial officer and Americas
area president, Dow Corning. “Fortunately, we recognized that our environment
was changing, and we were able to adapt. Our two-brand strategy offers the
choices and solutions that customers need to help them solve problems and seize
opportunities.”

The first of its kind in the chemical marketplace,
and unrivaled to date, Xiameter has helped bring change to the industry.
Designed for customers who can order in large volumes and do not need extra
services or technical support, it complements the corporate brand, which comes
with expertise, advice, counsel, labs, technical support, and scientists. So
rather than cannibalizing the corporate brand as some feared, Xiameter has only
made it stronger.

In 2000, Dow Corning had virtually zero
online sales. By 2006, however, the percentage of combined Dow Corning and
Xiameter sales conducted online had risen to 30% - significantly higher than
the industry average. According to a benchmark study conducted by the American
Chemistry Council, chemical companies in America on average conducted just 11%
of their sales through e-commerce methods in 2004 and 12.8% in
2005.

Dow Corning achieved investment payback only four
months after the launch of Xiameter.

The
significant reduction in inventory, which is attributed to Xiameter’s
products being “made to order” with required minimum lead times, freed up
working capital as well.

In its first year, Dow Corning
estimates that its new business model reduced logistics costs by 60%, saving
the company approximately $3.5 million, mainly due to the elimination of
warehousing costs and more efficient shipping of larger
loads.

Xiameter also serves as a means of geographic
expansion for the corporation. Originally selling products in 50 countries,
Xiameter is now configured to sell in 83 countries, some of which were new to
Dow Corning.

“What we have achieved over the past five years
not only indicates our success, but it shows that we have been able to help our
customers succeed as well by offering them choices in how they want to purchase
materials,” said Shelley Bausch, global executive director, Xiameter.

Offering
customers choices and bringing new value propositions to the silicone
marketplace, Xiameter was only one part of the company’s larger global repositioning
strategy, which was based on the results of Dow Corning customer feedback and
segmentation studies.

The Dow Corning brand was re-focused
on providing a variety of solutions and services, in addition to the thousands
of silicon-based materials the company offered. By making this change coincide
with the launch of Xiameter, the company was able to reinforce the value of its
corporate brand.

“We took advantage of a tremendous
opportunity to create solutions and provide services to our customers,” said
Sheets. “Our customers told us they were willing to pay for these
offerings.”

Today, Dow Corning provides a range of solutions
that includes full formulation development, analytical and application testing,
and environmental health and safety services.

Dow
Corning Corp. provides performance-enhancing solutions to serve the diverse
needs of more than 25,000 customers worldwide. A global leader in silicon-based
technology and innovation offering more than 7,000 products and services, Dow
Corning is equally owned by The Dow Chemical Co.
and Corning Inc. More than half of Dow Corning’s annual sales are outside the United States.
For more information, visit www.dowcorning.com.

Xiameter, a global brand of
Dow Corning Corp., offers market-driven prices for high-volume shipping units
of commonly used silicon-based materials. Launched in 2002, the business offers
more than 400 products, including silicone fluids, sealants, emulsions, and
rubber. Xiameter reduces costs to customers through streamlined services, the
application of straightforward business rules and web-enabled transactions. For
more information, visit www.xiameter.com.

Products

The Handbook of Sealant Technology provides an in-depth examination of sealants, reviewing their historical developments and fundamentals, adhesion theories and properties, and today’s wide range of applications.